MarketsFarm — The ICE Futures canola market strengthened during the week ended Wednesday, hitting fresh highs in many contract months.
“The trend remains up,” analyst Mike Jubinville of MarketsFarm Pro said. “The price of canola needs to be put at a level that discourages exports, while the domestic crushers actively pursue attaining as much of the limited supply that we have this year.”
While short-term corrections are possible as fund traders will book profits on their large net long positions from time-to-time, “as long as the energy sector continues to trend upwards… it’s hard to envision that canola will go into any sustained downtrend.”
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Chicago Board of Trade soybean futures hit their highest level in more than a week on Thursday as technical buying helped the market recover from a three-month low reached on Monday, analysts said.
The Chicago Board of Trade soy complex also showed some strength during the week, but Jubinville noted canola’s traditional relationship with soybeans and soyoil is out of balance.
The traditional calculation for determining crush margins uses soyoil and soymeal as benchmarks. When looking from that perspective, canola crushers should be seeing negative margins.
However, Jubinville said, the actual canola oil premium over soyoil, which is not publicly reported, is at record levels.
“So the real crush margin that doesn’t show up in a theoretical calculation is still profitable, said Jubinville. “I can’t recall a time when canola and soybeans have been out of balance to this degree.”
— Phil Franz-Warkentin reports for MarketsFarm from Winnipeg.
